December 30, 1999 4:00 AM PST

DVD sales see hot growth projections

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Booming DVD sales may be an indication that the VCR could soon be headed the way of the eight-track player.

DVD players were so hot in 1999 that the Consumer Electronics Association twice revised its sales estimates to match current growth. In the end, sales will likely more than double original projections.

"DVD is the fastest-growing consumer electronics product," said Ann Saybolt, a staff director with the Consumer Electronics Association (CEA).

In November alone, retailers sold 450,000 DVD players, while 3.4 million units have gone out the door for the year so far, according to CEA. For 1999, the group anticipates 4 million players will be sold. Earlier, the CEA predicted sales would come to 1.8 million and then 3 million units.

And DVD's growth isn't just reserved for the living room. DVD-ROM drives will surpass CD-ROM drives in computers by 2001, analysts said.

All told, the high-capacity storage technology's time seems to have arrived. DVD was once considered too pricey for computers and too risky as a replacement for VHS tapes, but both PC makers and entertainment companies have now embraced the medium.

Their confidence is well placed, as DVD player and movie sales heated up most during the holidays. Different DVD players were the three top-selling online items Christmas week for Crutchfield, a Charlottesville, Va.-based catalog and online electronics retailer. For the month, DVD players led Crutchfield online sales, while overall unit volume sales tripled between December 1998 and December 1999.

"The popularity of DVD players at Christmas bodes well for next year," said Dan Hodgson, senior vice president of merchandising for Crutchfield.

For Best Buy, which sold out of DVD players last Christmas, DVD is big business.

"Along with the other new digital technologies, DVD is really driving holiday sales," said Best Buy spokeswoman Joy Harris. Overall, DVD revenue outpaced video revenue, which includes VCRs and tapes, at the stores.

Falling DVD player prices have been an important factor driving sales. Crutchfield estimates that prices are 20 percent lower than last December.

"One reason DVD is taking off this year more than a year ago is that price points have come down so that now it's OK to buy [at] $199," Harris said. "Last year our lowest price point was in the $299 range, and obviously that $100 price drop drives more purchases."

The availability of new movie titles is also feeding the DVD frenzy.

"If you compare it to a year ago, many of the movie studios weren't supporting DVD," said Reed Hastings, CEO of Netflix.com. "Disney wasn't in, and some studios were only occasionally releasing things, with most major titles coming out later on DVD." Hastings estimates studios now release about 100 new DVD movies each week.

Business is also booming at Netflix.com, which rents DVD movies online. The company is moving about 100,000 DVD rentals a week, and, with holiday demand, is out of many popular titles.

Best Buy, which at one time stocked as many as 12,000 VHS movies, has been clearing space for DVD titles. The Minneapolis-based retailer now stocks only about 2,000 VHS movies, compared to 1,500 DVD titles, and expects to make more room for DVDs.

DVD, once disdained by movie studios, now gets top billing on new releases. "When titles debut, DVD is outselling VHS in blockbuster titles like 'Saving Private Ryan,'" Harris said. The exception is kids' movies, which continue to sell better in VHS format.

Besides strong consumer electronics DVD demand, DVD-ROM drive sales in PCs are picking up rapidly.

There were 94.9 million CD-ROM drives sold this year compared with 13.4 million DVD-ROM drives, either in PCs or as add-on devices. But DVD will gain quickly, said Disk/Trend president James Porter, who added, "1999 we think is the peak year for CD-ROM drives."

Disk/Trend estimates that by 2001 DVD-ROM sales will pass CD sales, 60.3 million units to 56.8 million, respectively. By 2002, consumers will buy 92.8 million DVD drives, with the majority being sold as built-in features of PCs, compared to 30.3 million CD drives.

Hewlett-Packard is making big moves into DVD, as well as CD-RW, or recordable CD drives. The Palo Alto, Calif.-based PC maker next month will revamp its Pavilion line of consumer PCs, shipping half with DVD drives. "We don't go much for 'bleeding edge' technology," said HP spokesman Ray Aldrich. "We go for relevant technology that consumers are interested in buying."

"People use the computer and watch a few DVDs, and say, 'Wow, this is a great experience.'" Hastings added. "Then they spend 200 bucks and get a player for the living room."

Despite DVD's progress, VHS movies and VCR players will likely continue to sell as long as they are recordable and DVDs are not.

"There's a better quality technology available," said Harris. "So people are doing DVD players in the parents' space and the VCR goes into the kids' recreation room or bedroom."

 

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